On the 23d of November, 1887, the Commercial National Bank of Pennsylvania filed its bill of complaint in the circuit court of the United States for the southern district of Ohio, against David Armstrong, receiver of the Fidelity National Bank of Cincinnati, the purpose of which bill was to charge the defendant, as trustee of the plaintiff, for $17,460.32, certain funds in his possession. To this bill of complaint the defendant duly appeared and answered. After the taking of testimony, the case was submitted on pleadings and proofs, and on the 8th of June, 1889, a decree was entered in favor of the plaintiff, directing the defendant to pay to it the sum of $7,209.59, which he was adjudged to hold as trustee, and also whatever sums he might thereafter receive from the receiver of the Fifth National Bank of St. Louis, Mo., as dividends upon the sum of $1,577.89, the amount of paper transmitted to that bank for collection. From this decree both parties appealed to this court. The opinion of the circuit court was delivered by Jackson, Circuit Judge, and will be found in 39 Fed. Rep. 684.

The transactions between the two banks originated in the following letter, sent by the Fidelity National Bank to the plaintiff:

'Com'l Nat. B'k, Philada., Pa.-Gentlemen: Enclosed herewith we hand you our last statement, showing us to be the second bank in Ohio, in deposits, in the tenth month of our existence. We should be pleased to serve you, and trust you will find it to your advantage to accept one of the following propositions:

'No. 1. We will collect all items at par, and allow 2 1/2 per cent. interest on daily balances, calculated monthly. We will remit any balance you have above $2,000 in New York draft, as you direct, or ship currency at your cost for expressage.

'No. 2. Will collect at par all points west of Pennsylvania, and remit the 1st, 11th, and 21st of each month.

'No. 3. We will collect at par Ohio, Indiana, and Kentucky items, and remit balance every Monday by draft on New York.

'We do not charge for exchange on propositions No. 1, 2, and 3.

'No. 4. Will collect Cincinnati items and remit daily at 40 cents per thousand, or 20 cents for $500 or less.

'National banks not in a reserve city can count all they have with us as reserve.

'Your early reply will oblige, respectfully yours,

E. L. Harper, V. P.'

To this letter the plaintiff replied on February 18th, accepting proposition No. 2; and thereafter, from time to time, forwarded paper for collection. The Fidelity Bank caused to be made and sent to the plaintiff a rubber stamp for use in indorsing paper thus forwarded. This stamp read as follows:

Business was carried on between the two banks under this arrangement until June 20, 1887, when the Fidelity Bank failed, having in its hands, or in the hands of other banks to which the same had been sent by it for collection, proceeds of paper forwarded by plaintiff after June 4th amounting to $16,851.92. The only correspondence which took place during this time between the parties, which can be considered as throwing any light upon the arrangement between them, was a letter from the plaintiff of May 25th, as follows: 'We don't wish to complain, but would like to understand why your remittance to us of May 21 only included items sent you up to May 14, and received by you on the 16th. We have to explain these things to our depositors, and wish to act intelligently on the subject;' and a reply in these words: 'We collect at par, and include in our remittances everything collected to date.' The conclusions of the circuit judge were that the relation between the two banks was that of principal and agent,-a relation which continued, not only while the paper was held by the Fidelity Bank, but after the moneys had been collected thereon; but that, in order to enforce a trust in favor of the plaintiff as to any of the moneys so collected, they must be specifically traceable, and that it was not sufficient to show that by collection they had passed into the general funds of the bank. This paper had substantially all passed into the hands of other banks, to whom it had been sent by the Fidelity Bank, as its subagents, and the circuit judge held that if the Fidelity was indebted to these local banks, subagents, and the collections, when made, were entered in their books as a credit to such indebtedness, they must be considered as reduced to possession, and as having passed into the general funds of the Fidelity; but that, on the other hand, if the Fidelity was not indebted to the subagent banks, and the collections remained in their hands to be subsequently remitted to the Fidelity, and in fact were paid to the receiver after his appointment, they were specifically traceable, and were therefore subject to the trust created by the relationship between the two banks, and payment thereof could be enforced out of the funds in the hands of the receiver.